Gold hovers below $4,400 as oil, Treasury yields pressure bullion
As global economies around the world relax their respective states of lockdown, copper, considered a leading indicator for economic growth has continued to gain.
In a previous article ‘Copper up 30% but still negative for the year’ it was guided that copper was starting to benefit from both a supply side disruption and a pickup in demand, as major producers in South America (such as Brazil, Chile & Peru) were finding a late disruption from the Covid-19 pandemic, while China (primary consumer of copper) was starting to pick up business activity after having emerged first out of the global lockdown.
Copper a leading indicator
As global economies around the world relax their respective states of lockdown, so too is the expectation of an economic recovery amidst unprecedented levels of global stimulus. Copper, considered a leading indicator for economic growth has continued to gain, suggesting the improved outlook.
Copper resistance target now breakout level
Since breaking the 5815-resistance level, the price of copper pulled back briefly before moving aggressively towards our previously guided upside target of 6080. The price is now testing this (6080) resistance level. A break (confirmed with a close) above this level would call for further gains with 6350 the next upside resistance target.
Overbought but still in uptrend
While the trend is up for copper, the short-term gains have moved the price into overbought territory. The overbought signal is not however a signal to trade against the upward trend. Instead, should a pullback towards horizontal (5940) or trend line (5830) manifest, traders might also see this as an opportunity for long entry into the meta once again.
200MA marks key support level
5665 marks a major low in the uptrend which has been in place since March this year. This level coincides with the 200-day simple moving average. Should the copper price instead move to close and trade below this level, would we reassess the long bias considered to trading the commodity.
Major producers of copper
Major listed producers which are influenced by movements in the copper price include Freeport-McMoRan, The BHP Group, Xstrata, Rio Tinto (LON:RIO), Anglo American (LON:AAL) Plc and Glencore (LON:GLEN).
